Compliance, CRM for financial advisors represent growing niche for channel

There's a growing opportunity around compliance and CRM for financial advisors. Learn how IT solution providers are helping RIAs and dealer-brokers.

The growth of registered investment advisors has created a promising financial services niche for some IT consultants and integrators.

Registered investment advisors, or RIAs, are individuals or companies that counsel clients on investing. The segment seems to be gaining momentum: The median RIA firm saw the value of its assets under management expand 13.3% year over year in 2012, according to a Charles Schwab report released in July. That report projected that by the end of 2014 "about one-third of advisor firms will have doubled in size over the previous five-year period." The report cited "investment performance" and the ability of RIAs to attract new clients as factors contributing to growth.

Channel executives said advisors are looking for customer relationship management (CRM) systems and workflow automation, but have found that horizontal cloud offerings tend to lack the features they need. Integration is another challenge as RIAs look for greater coordination among systems that help manage their practices.

Solutions providers may market products and services directly to RIAs or to brokerages cultivating relationships with RIAs. Broker-dealers -- companies that buy and sell securities -- range from the brokerage units of massive commercial banks (Bank of America or Merrill Lynch) to small and midmarket independent broker-dealers. Larger brokerages seeking to grow their RIA channels sometimes offer a technology package as part of the deal. In fact, some RIAs seek to affiliate with larger broker-dealers for just that sort of infrastructure support.

Independent broker-dealers, for their part, also represent a market for IT solutions providers. Those firms offer services similar to their larger mega-broker counterparts, but reach out to clients through independent contractors rather than broker-employed reps. Integration and CRM for financial advisors are also important as independent broker-dealers look to improve automation at the corporate office and for their independent reps.

Technology for maintaining regulatory compliance also provides channel opportunities. The U.S. Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA), an independent regulator of securities firms, both have data retention regulations on the books. The compliance burden generates demand for archival systems.

Growth around CRM for financial advisors

AppCrown LLC, a New York City-based provider of integration and practice management solutions, initially focused on work with RIAs, but has since expanded that to include independent broker-dealers and, most recently, the wealth management divisions of banks' brokerage units.

Franklin Tsung, AppCrown's chief operating officer, said the company has seen a sharp rise in business, despite the economic doldrums that have plagued many small and midmarket firms. He said revenue growth has exceeded 100% year over year.

"Our staff has expanded twofold in the past 12 months, and the main driver of that growth is this movement to the cloud," Tsung said.

AppCrown builds its solutions on top of The company provides an integration engine that ties the Salesforce cloud-based CRM system into other critical independent broker-dealer or RIA systems. For an independent broker-dealer, integration could mean tying CRM into custodial or clearing platforms, financial planning systems and form management systems, Tsung said. RIAs can use AppCrown's integration engine to link CRM into financial planning and portfolio accounting systems.

Salesforce, on its own, doesn't provide that level of integration, Tsung noted. He said the company offers a platform play for small or large institutions, but falls short of the needs of an independent broker-dealer or RIA when used as-is.

"When purchased as a general CRM [system, Salesforce] does not satisfy the customers' needs for a tightly integrated system," Tsung said.

Clint Oram, co-founder and chief technology officer at Cupertino, Calif.-based SugarCRM, also recognized the limitations of horizontal CRM systems in vertical markets. In the investment advisor space, the company now partners with an independent software vendor (ISV) that specializes in financial practitioners. He said the ISV, ProTracker Software Inc., has made SugarCRM the basis for an upcoming product.

The arrangement with ProTracker is part of a broader move into the ISV channel. SugarCRM, Oram noted, aims to offer its product as a "CRM platform that we make available to other software vendors who deliver vertical applications on top of that."

Oram said the vertical approach will help extend the appeal of the company's CRM offering -- which may be deployed on-premises or in the cloud -- to new customers. He said SugarCRM has spent the past year formulating its ISV strategy, which is now coming out of incubation. Oram also said the recent the ISV focus complements the company's value-added reseller channel, which has been in place for about a decade.

Appirio Inc., a cloud services provider based in San Francisco, has found an opportunity in building "advisor workstation" applications on top of Glenn Weinstein, chief technology officer at Appirio, said his company has seen an uptick in interest from large financial services companies that want to equip their independent reps with sales and workflow tools.

Weinstein said the advisor workstation application guides advisors through processes such as opening a new account. The application leads an advisor through a "discovery session" with a client, prompting the advisor with potential questions to ask, he explained. The idea is to help the advisor match a client to different types of products and to uncover a new set of opportunities. The new opportunities can flow into the Salesforce CRM system.

Appirio taps Salesforce components to deliver the advisor workstation application, which can run on a desktop browser or tablet. serves as the back-end database, while's Visualforce framework lets Appirio build custom user interfaces for the desktop browser option. Salesforce Mobile SDK, meanwhile, provides the toolkit to extend the advisor workstation application to tablets.

Solution providers targeting RIAs and independent broker-dealers should prepare themselves for a fair amount of tailoring. The market calls for a bit more than strictly off-the-shelf technology.

"Every solution is pretty customized in this area," Weinstein said. "Standard workflows and wizards generally tend to be too rigid."

Market nuances

Weinstein pointed to flexibility, in addition to customization, as an important theme in the market. He said systems for RIAs and broker-dealers should provide the investment advisor with advice and guidance, but avoid a rigid workflow.

"The key is a flexible model that lets the advisor go down different paths without a lot of required fields and let them run their own discovery process," Weinstein said.

More on CRM for financial advisors

See why financial services firms need to focus on online service

Learn how customers are taking control of relationships in financial services

See how CRM technology is cutting costs and improving service in financial services

The issue of independence is another market nuance channel companies may encounter. An independent broker-dealer that wants to deploy one CRM product for both the company's headquarters and its rep network could run into resistance. Tsung suggested independent reps may not want to be part of the office system. He also noted the licensing costs of providing to every rep.

AppCrown's workaround is to sell Salesforce to the independent broker-dealer for headquarters, but give sales reps options regarding which CRM system they purchase, Tsung said. For instance, a rep could be given a choice of Salesforce or Redtail Technology's Redtail CRM. AppCrown would then use its middleware to link the reps' CRM systems back to the Salesforce deployment at company headquarters.

This approach helps independent broker-dealers maintain rep independence, while also providing the broker-dealer with rep oversight for management and compliance purposes. Tsung said an independent broker-dealer's compliance team or executive management team can go into Salesforce, pull up a rep's name, and view all of that rep's transactions.

Compliance, as it happens, surfaces as another wrinkle in the RIA and broker-dealer market. Broker-dealers typically fall under both SEC and FINRA regulations. RIAs fall under the SEC or state securities regulation agencies, depending on the value of the assets they manage. SEC and FINRA both call for data retention, which opens opportunities for document management and archiving solutions providers.

Docupace Technologies Inc., a Web-based document management system vendor headquartered in Los Angeles, offers write-once, read many (WORM) storage solutions that comply with SEC and FINRA regulations, noted Tom Embrogno, executive vice president at the company. He said the compliance task is compelling financial firms to make a WORM repository their top priority. Docupace markets to broker-dealers and RIAs.

"We are seeing the big companies put those [repositories] in place first," Embrogno said. "CRM, portfolio management, commission systems -- at the end of the day, all flow into your SEC or FINRA archiving solution."

Weinstein said archiving solutions typically accompany Salesforce Chatter installations in the financial market. Chatter is an enterprise social networking tool.

"When we roll out Salesforce Chatter in a financial services firm, that usually comes in conjunction with a third-party archival solution," he said. "It's a pretty standard requirement in financial services."

Dig Deeper on Vertical Market Sales Strategy